U.S. Taxation

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U.S. Taxation

The system under which American persons are taxed. There are many types of taxation in the United States. At the federal level, personal income, corporate income and capital gains are all taxed on a progressive scale: corporations and persons making more are taxed at a higher rate. Most states also have income taxes and some have corporate taxes as well. Most states and localities also have sales taxes and some local governments have wage taxes on top of everything else. Numerous deductions and credits exist so U.S. taxation does not become crippling. Compared to the rest of the world, U.S. corporate taxes are rather high and income taxes are rather low.

74) Foreign individuals exempt from United States taxation under treaty threshold rules for personal services may be exempt from United States social security contribution requirements under these provisions in a few tax treaties.

113) Under these treaties, residents of these countries are not subject to United States taxation on United States benefits they receive.

117) The United States employs the saving clause to prevent its citizens from establishing foreign residency and using a treaty to achieve reduced United States taxation on United States-source income.

Under saving clause provisions, it is possible for a person who becomes a resident of another contracting state to be subject to United States taxation, including social security taxation, as if the person was a current United States citizen or resident.

However, an exception applies "to any amount that is income of a related foreign person with respect to which the related foreign person is exempt from United States taxation on the amount owed pursuant to a treaty obligation of the United States," except for interest.

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